BREEDON IN IRELAND Introduction 5 September 2019 BREEDON IN IRELAND
• A leading supplier of construction materials and contracting services on the Island of Ireland, via 2018 acquisition of Lagan Group • Well positioned in attractive Irish construction market • Anchored by modern, well-invested cement plant • Complementary upstream and downstream operations with strong potential for development and progressive vertical integration • Platform for organic growth and bolt-on acquisitions
Ireland introductory presentation 5 September 2019 2 ACQUISITION OF LAGAN GROUP STRATEGIC RATIONALE
Enhanced market position Creates a major independent construction materials group across the UK and Ireland ✓
Enhances Breedon’s geographic footprint with immediate critical mass in Ireland across Extended geographic coverage ✓ the whole value chain
Second plant provides further opportunities in cement production and enlarged markets Strengthened cement capability ✓ for bulk and bagged cement
Expanded range of products and Including Whitemountain high PSV stone; specialist emulsions & PMBs; bitumen ✓ services import/export; Welsh slate; airport infrastructure services
Further vertical integration Significant potential to expand upstream (aggregates business in Ireland) and downstream ✓ opportunities (growing asphalt and ready-mixed concrete operations)
Synergy benefits Estimated annual synergies of approximately £5 million by year 3 ✓
Expected increased cash flow and strong balance sheet will provide capacity to pursue Greater financial capacity ✓ future growth opportunities
Strengthened management and Experienced management team will continue to drive growth in Ireland, supported by ✓ complementary culture complementary culture and well-invested human capital
Favourable economic backdrop Positive outlook for Irish construction sector ✓
Ireland introductory presentation 5 September 2019 3 BREEDON IN IRELAND DIVISIONAL LEADERSHIP TEAM Pat Ward Group CEO
Terry Lagan Jude Lagan Aidan Mullan MD: Lagan MD: Cement MD: Whitemountain (RoI) (Ireland & GB) (NI)
Ireland introductory presentation 5 September 2019 4 BREEDON GROUP DIVISIONAL LEADERSHIP TEAM Pat Ward Group CEO
Terry Lagan Jude Lagan Aidan Mullan MD: Lagan MD: Cement MD: Whitemountain (RoI) (Ireland & GB) (NI)
Alan Mackenzie Mike Pearce MD: Breedon Northern MD: Breedon Southern (Northern GB) (Southern GB)
Ireland introductory presentation 5 September 2019 5 BREEDON IN IRELAND Introduction 5 September 2019 LAGAN A leading RoI construction materials and contracting business 5 September 2019 BUSINESS OVERVIEW
Lagan presentation 5 September 2019 2 BUSINESS OVERVIEW
• 13 quarries (6 active) • 10 asphalt plants (8 active) • Bitumen importation & PMB plant • Bituminous emulsion plant • 7 rmx plants (4 active) • 2 concrete block plants (one active) • Contract surfacing & highway maintenance • Specialist roadmarking • c135 employees • 35m tonnes of mineral reserves & resources
Lagan presentation 5 September 2019 3 MARKET PROFILE & OUTLOOK
Lagan presentation 5 September 2019 4 ROI MARKET PROFILE
Market size • c350 large active quarries • c40 asphalt plants • c220 rmx plants Major competitors Production Roadstone (CRH) • c33mt of aggregates Kilsaran Harrington • c3mt of asphalt • c4.3m m3 of rmx
Sources: Irish Concrete Federation (2017), Independent Asphalt Producers Association, Management estimates
Lagan presentation 5 September 2019 5 ROI MARKET OUTLOOK
Economic growth • GDP forecast: +7.5% in 2019-20
Construction growth • Output forecast: +17% in 2019-21 • Building & construction investment: +22.5% in 2019-20 • Estimated value of construction output by 2020: €30bn
Project Ireland 2040 • Population to grow 19% to 5.7m by 2040, 75% of growth outside Dublin • National Development Plan 2018-27: €116bn of investment
Sources: European Commission, Euroconstruct, Construction Industry Federation, Project Ireland 2040/National Development Plan
Lagan presentation 5 September 2019 6 PROJECT IRELAND 2040
Substantially funded directly by Government
• Priority to increase housing supply to baseline 25,000 homes p.a. by 2020 and 30-35,000 p.a. to 2027 • €2 billion Urban Regeneration and Development Fund to achieve sustainable growth in key cities and urban centres • Investment in enhanced regional road networks • €1 billion Rural Regeneration and Development Fund • Investment in environmentally sustainable public transport • Continued significant investment in ports and airports • Major cultural and heritage infrastructure plan • €500 million Climate Action Fund, focused on transport infrastructure • Investment in water infrastructure • Investment in large-scale schools and health infrastructure
Source: Project Ireland 2040: Building Ireland’s Future
Lagan presentation 5 September 2019 7 PROJECT IRELAND 2040
Major potential projects pending
• Castlebar bypass €5-10m • Cork Airport runway overlay €5-10m • Cork - Limerick motorway c€30m • Dunkettle Interchange €15-20m • Galway bypass €15-20m • Macroom bypass €10-15m • N5 €10-15m
Lagan presentation 5 September 2019 8 OPERATIONS
Lagan presentation 5 September 2019 9 OPERATIONS CONSTRUCTION MATERIALS
AGGREGATE PRODUCTION AGGREGATES (6 active quarries) ASPHALT CRUSHED ROCK CRUSHER RUN & (8 active plants) SAND & GRAVEL GENERAL FILL RMX (4 active plants) BLOCKS (1 active plant)
BITUMEN IMPORTATION & DISTRIBUTION POLYMER MODIFIED BITUMEN PENETRATION BITUMEN EMULSION GRADE (1 terminal)
Lagan presentation 5 September 2019 10 OPERATIONS CONTRACTING
HIGHWAY MAINTENANCE CARRIAGEWAY ROAD MARKING, RECONSTRUCTION SMALL SCALE, SURFACE RESPONSIVE DRESSING & HIGH MINOR IMPROVEMENTS FRICTION
AIRFIELD CONSTRUCTION RUNWAY CONSTRUCTION TAXIWAY APRON & REFURBISHMENT CONSTRUCTION & CONSTRUCTION & REFURBISHMENT REFURBISHMENT STANDS PITS/DUCTS & AIRFIELD GROUND DRAINAGE LIGHTING
Lagan presentation 5 September 2019 11 CURRENT PROJECTS
N25 New Ross Bypass
Typical Lagan surfacing project
Supply & placement of 150,000t of bituminous materials Due for completion September 2019
Lagan presentation 5 September 2019 12 CURRENT PROJECTS
Dublin Airport Runway 16-34 apron rehabilitation
Complex project, winter working, mainly at night, with limited availability
Overnight runway pavement inlay and overlay, 200,000m² Supply & placement of 30,000t of Marshall asphalt Nearing completion
Lagan presentation 5 September 2019 13 BUSINESS INITIATIVES
Lagan presentation 5 September 2019 14 BUSINESS INITIATIVES
Operational quarries Extending quarry network • Selective reopening of inactive quarries • Extensions to existing quarries • Conversion of resources to reserves 3 3 5 6 • Acquisition of additional reserves, 2016 2017 2018 2019 notably in Greater Dublin Operational quarries Emphasis on securing internal • 600 aggregates supplies 500 400 • Targeting 1-2mt p.a. output over 300 medium term 200 100 0 2015 2016 2017 2018 Aggregates output '000 tonnes
Lagan presentation 5 September 2019 15 BUSINESS INITIATIVES
Expanding readymix plant network • Closely linked to acquisition of internal aggregates supply • Combination of greenfield and acquisition • Pipeline identified and discussions opened with selected targets
Lagan presentation 5 September 2019 16 QUESTIONS
Lagan presentation 5 September 2019 17 LAGAN A leading RoI construction materials and contracting business 5 September 2019 WHITEMOUNTAIN A leading NI construction materials and contracting business 5 September 2019 BUSINESS OVERVIEW
Whitemountain presentation 5 September 2019 2 BUSINESS OVERVIEW
• 6 quarries (4 active) • Sand dredging operation • 5 asphalt plants (3 fixed, 2 mobile) • 4 rmx plants (3 active) • 1 concrete products plant • 1 waste/green energy site • 2 inert landfill sites • Aggregate export terminal • Bitumen importation terminal • Contract surfacing & highway maintenance • Civil engineering • c265 employees • c30m tonnes of mineral reserves & resources
Whitemountain presentation 5 September 2019 3 MARKET PROFILE & OUTLOOK
Whitemountain presentation 5 September 2019 4 NI MARKET PROFILE
Market size • c100 active quarries • c33 asphalt plants Major competitors c80 rmx plants • Northstone Production F P McCann John McQuillan • c15m of crushed rock Patrick Keenan • c1.3mt of asphalt Gibson Bros Conexpo • c2.3m m3 of rmx
Sources: DfE Annual Mineral Statement 2016, Management estimates, BDS Marketing Research
Whitemountain presentation 5 September 2019 5 NI MARKET OUTLOOK
Economic growth • GDP forecast: +1.0% in 2019 and +1.3% in 2020
Construction growth • Forecast to grow by average 0.8% p.a. in 2019-23
Infrastructure pipeline • Approved NI capital budget c£1.4bn for 2019-20 • Procurement pipeline covered by Investment Strategy for Northern Ireland currently valued at c£2.4bn for 2019-21
Sources: Danske Bank, CITB/Construction Skills Network, NI Dept of Finance, ISNI
Whitemountain presentation 5 September 2019 6 INFRASTRUCTURE PIPELINE
Major projects (ISNI 2019-21)
• York Street Interchange £120-140m • Regional Children’s Hospital Belfast £90-100m • Belfast Streets Ahead Public Realm Scheme £20-25m • Veterinary Science Laboratory Belfast £25-30m • A24 Ballynahinch Bypass £35-40m • A1 Grade Separated Junctions £40-45m • Belfast Transport Hub £30-35m
Whitemountain presentation 5 September 2019 7 OPERATIONS
Whitemountain presentation 5 September 2019 8 OPERATIONS CONSTRUCTION MATERIALS AGGREGATE PRODUCTION AGGREGATES (4 active quarries) ASPHALT AGGREGATES CRUSHER RUN & (3 static, 2 mobile plants) EXPORT GENERAL FILL RMX (3 active plants) BLOCKS (1 active plant)
WASTE MANAGEMENT & GREEN ENERGY
MUNICIPAL INERT GREEN WASTE WASTE ENERGY (1 landfill site) (2 landfill sites) (gas extraction & electricity generation)
BITUMEN IMPORTATION & DISTRIBUTION
POLYMER MODIFIED BITUMEN PENETRATION BITUMEN EMULSION GRADE (1 bitumen terminal)
Whitemountain presentation 5 September 2019 9 OPERATIONS CONTRACTING HIGHWAY MAINTENANCE CARRIAGEWAY SMALL SCALE, ROAD MARKING, RECONSTRUCTION RESPONSIVE SURFACE DRESSING & HIGH MINOR IMPROVEMENTS STREETLIGHTING FRICTION
CIVIL ENGINEERING HIGHWAY URBAN STRUCTURES & CONSTRUCTION REGENERATION BRIDGES
HEAVY DUTY INFRASTRUCTURE ENVIRONMENTAL PAVEMENTS WORKS IMPROVEMENT
AIRFIELD CONSTRUCTION RUNWAY CONSTRUCTION TAXIWAY APRON & REFURBISHMENT CONSTRUCTION & CONSTRUCTION & REFURBISHMENT REFURBISHMENT STANDS PITS/DUCTS & AIRFIELD GROUND DRAINAGE LIGHTING
Whitemountain presentation 5 September 2019 10 CURRENT PROJECTS
DFI Term asphalt resurfacing contract (Southern) Government investment in road improvement 4-year contract £7m p.a. 80 projects per year
• 10,000t of aggregates • 70,000t of asphalt • 1,500m3 of rmx
Whitemountain presentation 5 September 2019 11 CURRENT PROJECTS
Colley Lane Southern Access Road £multi-million access road for Bridgwater
1km of new single carriageway Construction of 52m single-span structural steel bridge and 28m precast concrete beam bridge
• 60,000t of aggregates • 9,500t of asphalt • 5,000m3 of rmx
Whitemountain presentation 5 September 2019 12 CURRENT PROJECTS
Kettering East Creating better access for Kettering residents
2.1km of new single carriageway Construction of new 45m roundabout Construction of 60m of 1.2m diameter tunnelling 8m beneath road
• 100,000t of aggregates • 14,500t of asphalt • 2,500m3 of rmx
Whitemountain presentation 5 September 2019 13 BUSINESS INITIATIVES
Whitemountain presentation 5 September 2019 14 BUSINESS INITIATIVES
Maintain and build on cycle of term maintenance contract work • 120,000 tonnes of asphalt laid per annum • Machine and hand-laying of CE accredited asphalt materials • Adjustment/installation of kerb lines • Adjustment/installation of drainage and ironwork • Road marking and studs • Cold milling • Traffic management • High friction surfacing
Whitemountain presentation 5 September 2019 15 TERM MAINTENANCE CONTRACTS (ASPHALT)
Whitemountain presentation 5 September 2019 16 BUSINESS INITIATIVES
Continue developing GB contracting business in alignment with GB construction materials business • Building on successful models of AWPR, Kettering/Wellingborough • Focus on projects where we can self- supply material • Contract surfacing complemented by ancillary civils • Target projects to suit skills and expertise • Selective approach to avoid risk transfer from clients • Platform to develop southern GB paving business
Whitemountain presentation 5 September 2019 17 BUSINESS INITIATIVES
Identify further opportunities in Group and externally for high PSV products
• Currently exporting c180kt of high PSV to GB • Complement existing Group resources, to improve internal supply efficiencies • Broaden external customer base
Whitemountain presentation 5 September 2019 18 QUESTIONS
Whitemountain presentation 5 September 2019 19 WHITEMOUNTAIN A leading NI construction materials and contracting business 5 September 2019 BREEDON CEMENT A major cement producer in Ireland 5 September 2019 BUSINESS OVERVIEW
Cement presentation 5 September 2019 2 BUSINESS OVERVIEW
• Modern cement plant at Kinnegad • Situated in limestone quarry with significant long-term reserves • Adjacent shale and sand quarries • Produces bulk and bagged cement for supply to Ireland and GB • c110 employees
Cement presentation 5 September 2019 3 MARKET PROFILE & OUTLOOK
Cement presentation 5 September 2019 4 IoI CEMENT MARKET PROFILE
Market size • Four cement companies • c6 million tonnes capacity Major competitors Production Irish Cement (CRH) • c4 million tonnes (2018) Quinn Lafarge Sales • c3 million tonnes
Source: Management estimates
Cement presentation 5 September 2019 5 IoI CEMENT MARKET OUTLOOK
Economic growth • RoI GDP forecast: +7.5% in 2019-20 • NI GDP forecast: +2.3% in 2019-20
Construction growth • RoI output forecast: +17% in 2019-21 • NI output forecast: avg. +0.8% p.a. in 2019-23
Sources: European Commission, Danske Bank, Euroconstruct, CITB/Construction Skills Network
Cement presentation 5 September 2019 6 IoI CEMENT MARKET CEMENT CONSUMPTION
Value of construction output c7% of GDP in 2018 vs c11% in 1980s
million tonnes
6.5
2.9 2.5 2.7 1.9 1.9 2.1 2.3
2007 2012 2013 2014 2015 2016 2017 2018
Sources: Cement Manufacturers Ireland, Trading Economics, Construction Industry Federation, NISRA
Cement presentation 5 September 2019 7 IoI CEMENT MARKET HOUSE COMPLETIONS
RoI housing investment increased by 24% in 2018 RoI housing investment expected to increase by c34% in 2019-20
102,517
21,255 25,680 16,345 10,447 9,985 11,037 12,665
2006 2012 2013 2014 2015 2016 2017 2018
Sources: Central Statistics Office, NI Department of Finance, Construction Industry Federation
Cement presentation 5 September 2019 8 OPERATIONS
Cement presentation 5 September 2019 9 OPERATIONS: KINNEGAD
• Commissioned 2002 • Kiln line rated at 1,800tpd/clinker • Can produce 700,000t cement, depending on fossil fuel replacement levels • Presently exporting bulk and bagged cement to GB • Fossil fuel replacement/alternative fuels @70% (5-10% reduction in clinker) • c50mt of limestone reserves & resources, sufficient for c50 years
Cement presentation 5 September 2019 10 c50 YEARS OF LIMESTONE RESERVES & RESOURCES
Cement presentation 5 September 2019 11 PRODUCTION PROCESS
Quarrying Raw meal milling Clinker cooling Dispatch
Raw meal preparation Clinker production Clinker milling
Cement presentation 5 September 2019 12 QUARRYING LIMESTONE 75% OF MIX
Drill Blast
Cement presentation 5 September 2019 13 RAW MEAL PREPARATION
Stacker Reclaimer
Cement presentation 5 September 2019 14 RAW MEAL MILLING
Cement presentation 5 September 2019 15 CLINKER PRODUCTION
Raw meal converted to clinker
Cement presentation 5 September 2019 16 CLINKER COOLING
Recirculating heat: no emission point
Cement presentation 5 September 2019 17 CLINKER MILLING
Cement presentation 5 September 2019 18 BUSINESS INITIATIVES
Cement presentation 5 September 2019 19 BUSINESS INITIATIVES Alternative fuels
Cement presentation 5 September 2019 20 BUSINESS INITIATIVES
Alternative fuels
80% Consistent improvement in alternative fuel substitution
70% Targeting c80% in medium term
60%
50%
40% 70% 72% 65% 30% 58%
20%
10% 20% 15%
0% 2007 2008 2009 2010 - 2017 2018 H1 2019
Cement presentation 5 September 2019 21 BUSINESS INITIATIVES Carbon reduction
Steady reduction in fossil fuel usage 2006-18
Decrease in coal usage per tonne of cement produced
63%
Total fossil fuel CO2 tonnes saved by coal substitution
Source: Management information
Cement presentation 5 September 2019 22 BUSINESS INITIATIVES Operational improvement
• ‘Be even Better’ initiative to deliver continued operational excellence • Learning & sharing teams exchanging best practice with Hope • ‘Steal with pride’ programme of European plant visits • Ongoing coaching, mentoring and learning & development programmes
Cement presentation 5 September 2019 23 QUESTIONS
Cement presentation 5 September 2019 24 BREEDON CEMENT A major cement producer in Ireland 5 September 2019